G20 may sidestep trade issue due to discord with U.S. – Schaeuble

BERLIN (Reuters) – The protectionist stance of the new U.S. administration could complicate G20 talks this week and force policymakers to leave out the disputed trade issue, German Finance Minister Wolfgang Schaeuble told Reuters in an interview.

Speaking ahead of the G20 gathering of finance ministers and central bankers in the German town of Baden-Baden on Friday and Saturday, Schaeuble said it was still unclear if the G20 would keep joint language supporting free trade and open markets.

“There are differing views on this subject,” Schaeuble said, pointing to “America First” comments by U.S. President Donald Trump and other senior U.S. government officials.

“It’s possible that we explicitly exclude the topic of trade in Baden-Baden and say that can only be resolved at the summit of the state and government leaders.”

An early draft communique for the G20 meeting had suggested that the world’s financial leaders might no longer explicitly reject protectionism, breaking with a decade-old tradition.

“This is not the ideal solution, but it would not be such a big deal,” Schaeuble said about the possibility that the G20 members might fail to reach an agreement on trade.

The final communique of Baden-Baden should send the message that international cooperation is still robust in times of growing geopolitical risks, Schaeuble said.

He said he believed the G20 would keep established language rejecting foreign exchange rate manipulation. “That’s my expectation,” Schaeuble said.

Schaeuble said he would ask his U.S. counterpart Steven Mnuchin during talks in Berlin later on Thursday to explain any plans to overhaul the U.S. tax code and favour exports over imports by introducing a border adjustment tax.

“I’ll tell him the arguments that from my point of view speak against changing the tax system of the whole world,” Schaeuble said. “I hope that we’ll achieve sensible results.”

Schaeuble also said that he did not expect Washington to roll back all financial market regulations after Trump ordered reviews of major banking rules put in place after the global financial crisis.

“I’m not that pessimistic,” Schaeuble said, adding that the United States had an interest in completing current negotiations of Basel III banking rules.

Reacting to repeated U.S. criticism of Germany’s large current account surplus, Schaeuble said that Germany’s strong export performance was also a result of the European Central Bank’s loose monetary policy.

“Unfortunately, I have to say, many who criticise the German surplus have not supported me in the matter of not relying increasingly on monetary policy to generate growth.”

Schaeuble has repeatedly called for higher interest rates, urging governments to create the conditions for sustainable growth by implementing structural reforms.

The minister told Reuters that if the euro weakened further, it would probably help to push up inflation in the currency bloc.